According to the Ministry of Finance's Decision 2967/QD-BTC, the maximum price for economy-class tickets on domestic air routes was calculated based on the price of Jet A1, which was estimated to be sold at $130 per barrel with zero per cent import taxes. — File Photo

HA NOI (Biz Hub) — The Civil Aviation Administration of Viet Nam (CAAV) has suggested to the Ministry of Transport the reduction of economy-class airfares on domestic routes.

Following CAAV's petition, which was based on the substantial decrease in the price of commercial aviation fuel Jet A1, airfares would be slashed from the current VND5,000 (US$0.23) to VD4,250 ($0.20) per km for every passenger.

According to the Ministry of Finance's Decision 2967/QD-BTC, the maximum price for economy-class tickets on domestic air routes was calculated based on the price of Jet A1, which was estimated to be sold at $130 per barrel with zero per cent import taxes.

However, the price of Jet A1 (including 7 per cent import tax) was only $90.63 per barrel as of December 2014. Therefore, the petrol costs dropped by 43.4 per cent compared with the maximum price considered in the ministry's decision.

The CAAV said that fuel costs accounted for approximately 39.5 per cent of the airline's overall costs. Hence, the airline's total costs would drop by 17 per cent following the petrol price decline. — VNS